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Which of the following is not considered a transaction cost incurred by parties in the process of contracting to eliminate a pollution externality ?

A. costs incurred due to lawyers’ fees

B. costs incurred to reduce the pollution

C. costs incurred to enforce the agreement

D. costs incurred due to a large number of parties affected by the externality

E. All of these answers are considered transaction costs

Related Questions on Externality & Internality Mcqs

Tradable pollution permits ?

A. reduce the incentive for technological innovations to further reduce pollution.

B. set the price of pollution.

C. determine the demand for pollution rights.

D. Set the quantity of pollution

Roberto and Thomas live in a university hall of residence. Reberto values playing loud music at a value of €100. Thomas values peace and quiet at a value of €150. Which of the following statements is true about an efficient solution to this externality problem if Roberto has the right to play loud music and if there are no transaction costs ?

A. Thomas will pay Roberto between €100 and €150 and Roberto will continue to play loud music

B. Roberto will pay Thomas €150 and Roberto will continue to play loud music

C. Thomas will pay Roberto between €100 and €150 and Roberto will stop playing loud music

D. Roberto will pay Thomas €100 and Roberto will stop playing loud music